The Indo-Pacific must navigate parallel globalisations, driven by regional imperatives—shaping economic choices and, inevitably, political alignments
Image Source: Getty Images
This article is part of the series—Jakarta Edit 2025
While the term “Indo-Pacific” has a longer provenance, its emergence as a geoeconomic and geopolitical concept is largely a 21st-century one. Even so, barely a quarter into the century, it finds itself facing challenges and headwinds that would seem to question its foundational premise.
The roots of the modern Indo-Pacific region lie in the attributes and successes of the Association of Southeast Asian Nations (ASEAN) experiment, subsequently expanded by incorporating ASEAN partner countries into the East Asia Summit (EAS). A broader Indo-Pacific, stretching, depending on one’s vantage point, from the western shores of Australia or the western coast of the United States (US) to the maritime edge of India, was posited as a natural corollary. It would entail a network of minilateral and plurilateral sub-regional arrangements that would attempt to learn and draw from the ASEAN template, with appropriate variations. For India, in particular, the Indo-Pacific arc extends further westward to include the eastern shores of Africa.
Underpinning this evolving framework was a traditional American posture, with the United States (US) as the principal stakeholder and guarantor of economic cooperation and regional security architecture. The different arrangements between the US and its partners and allies helped craft the EAS, the Quad, and, more recently, AUKUS. These were all attempts at expanding cooperation among the like-minded, harmonising responses to the rise of China and incentivising US partners to participate in burden sharing. China’s rise was consequential in its very size, even if Beijing were not explicitly revisionist.
The neat synergy of supply chain integration with China and exports to the US has been severely disturbed. Differential deal-making has been legitimised in trade negotiations in a manner unknown.
The COVID-19 pandemic was an inflexion point. Its impact on supply chains emphasised the risks of manufacturing and sourcing concentration, impelling a China+1 strategy. Additionally, pure trade arrangements now cede space to supply chain harmonisation and technological partnerships among trusted countries. The traditional model of Indo-Pacific economic management and governance was sought to be remoulded, though not entirely discarded.
Since January 2025, US President Donald Trump’s second term has signalled a distinct rupture in the Indo-Pacific’s economic and strategic landscape. The retrenchment of American political and military undergirding has been accompanied by a fundamental revisiting of trade arrangements. Tariff wars are a consequence for all to see. These are reflected in Trump’s negotiations and ultimatums to Indo-Pacific countries, from Japan to Indonesia to Vietnam.
Tariff walls, transhipment tariff walls (likely aimed at products with less than 70 per cent domestic value add), sectoral tariffs in addition to bilateral tariffs, a hollowing out of the Most Favoured Nation principle, and a disruption of regional and global trading assumptions have all taken a toll on the Indo-Pacific’s economic model. The neat synergy of supply chain integration with China and exports to the US has been severely disturbed. Differential deal-making has been legitimised in trade negotiations in a manner unknown since the creation of the World Trade Organisation in 1995.
With rising protectionism and tariff walls, it is increasingly evident that political leadership in key consumer countries is willing to absorb higher prices. At least in the short run, they are confident in their ability to justify this to their political constituencies, whether by framing it as a national security need or as a sacrifice for longer-term onshoring of supply chains and jobs. Either way, this upends the lowest-cost, just-in-time, export-led growth that underpinned several Indo-Pacific economies.
With rising protectionism and tariff walls, it is increasingly evident that political leadership in key consumer countries is willing to absorb higher prices.
While the road ahead remains unpredictable, three immediate takeaways are clear.
First, countries will prefer trade relations with partners, or within plurilateral partnerships, that offer sufficient guardrails against a direct or indirect vulnerability to cheap Chinese imports. This preference will be calibrated by industrial sectors, depending on each country’s particular vulnerability. For India, it could be low-end manufactured goods; for Australia, telecom and critical infrastructure.
Second, while countries will continue to negotiate wide-spectrum trade agreements with blocs, they will push for gradations and agreed discrepancies in tariff lines with individual countries that might be part of the bloc. This, in turn, will depend on the individual exporter country’s external supply chain integration and rules-of-origin position with a specific third-party nation in given sectors and industries.
Such demands may be unorthodox, but they are already emerging. India’s renegotiation of its Free Trade Agreement with ASEAN is a case in point. Chinese presence in an individual sector and the national economy is being studied threadbare by Indian negotiators before suggesting tariff ladders even for the same commodity or import item.
The Indo-Pacific will need to adjust to a world of parallel globalisations, each defined by a different regional or geographical imperative. This will entail economic and technological choices and inevitably influence political alignments as well.
Third, companies will increasingly need to invest in parallel manufacturing lines and supply chain systems to service different markets. Toyota’s new electric vehicle plant in China is an example. The decision on where to locate the plant was not an easy one. It involved contextualising the cost of production, given the presence of the EV ecosystem in China, with potential tariff barriers to a made-in-China product in key markets. In the end, the case for China seemed the best option, or at least the least unfavourable. However, this decision came with a big caveat: recognition that the US EV market could one day require a separate in-country investment by Toyota.
In effect, the Indo-Pacific will need to adjust to a world of parallel globalisations, each defined by a different regional or geographical imperative. This will entail economic and technological choices and inevitably influence political alignments as well.
Ashok Malik is a Partner, The Asia Group, and Chair of its India practice.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
PREV
